Table of Contents
A Bitcoin transaction fee is a small amount of BTC that a user pays to have a transaction processed and confirmed on the Bitcoin network. The size of the fee directly affects how fast the transaction is confirmed: higher fees usually mean faster processing, especially when the network is busy.
Key Takeaways
Bitcoin transaction fees set the priority of a transaction in the network: higher fees usually mean faster confirmation.
The fee depends on network congestion and transaction size (in virtual bytes), not on the amount of BTC sent.
Lower fees reduce costs but can lead to long confirmation times during periods of high network activity.
To keep Bitcoin transaction fees simple and easy to understand, below we break down the main points:
- What is a Bitcoin transaction fee
- How to calculate a Bitcoin Transfer Fee
- How fees work in the Bitcoin network
- Why you need to pay Bitcoin transaction fees
- How to manually choose a fee in a wallet
What Is a Bitcoin Transaction Fee?
A Bitcoin transaction fee (also called a network fee or a miner fee) is a small amount of BTC that the sender pays to miners for processing and confirming a transaction on the network. In simple terms, this fee is required for a transaction to be included in the blockchain. When you send Bitcoin, the transaction first enters a queue of unconfirmed transactions called the mempool. Miners select transactions from the mempool for inclusion in the next block.
Miners are participants in the Bitcoin network who confirm transactions and keep the blockchain running. For their work, they receive rewards, including Bitcoin transaction fees.
Average Transaction Fee on Bitcoin. Source: theblock.co
How to Calculate a Bitcoin Transfer Fee?
A Bitcoin transaction fee consists of two simple parts:
- sat (satoshis) - the smallest unit of BTC. This is what you pay the Bitcoin transfer fee in.
- vB (virtual bytes) - the data size of a transaction. The more data a transaction contains, the higher the BTC transaction fee.
Bitcoin fees are calculated as:
transaction size (vB) × fee rate (sat/vB)
The higher the fee rate in sat/vB, the higher the transaction priority and the faster it is confirmed.
In other words, you are not paying for how much BTC you send, but for how much block space your transaction uses.
A higher fee in sat/vB means faster BTC transaction confirmation. Source: mempool.space
How Do Bitcoin Network Fees Work?
Bitcoin fees depend on three main factors: network congestion, transaction size, and desired confirmation speed.
Network Congestion: The more transactions waiting in the queue, the higher the competition for block space and the higher the Bitcoin network fee.
Transaction Size: A BTC transaction fee is calculated based on the amount of data (in virtual bytes), not on the amount of BTC sent.
Confirmation Speed: A higher Bitcoin fee means faster transaction processing, while a lower fee means a longer waiting time.
Why Do Bitcoin Transaction Fees Exist?
At first glance, it may seem logical to make Bitcoin transfers free. However, there are two main reasons why the network works differently. Fees are an incentive mechanism that keeps Bitcoin decentralized and secure.
Paying Miners and Securing the Network: Miners confirm transactions and spend electricity and hardware resources to do so. That is why the sender pays BTC fees: these fees compensate miners for their work and help keep the network secure.
Protection Against Spam: Without fees, the network could be overloaded with millions of small transactions. This is why Bitcoin transaction fees exist - they help the Bitcoin network remain stable and reliable.
How to Choose a Bitcoin Fee in a Wallet
In most Bitcoin Wallets, users can choose between low, medium, and high fee levels, depending on how fast they want their BTC transaction to be confirmed.
In Gem Wallet, this can be done in just a few clicks. Since the wallet is a mobile self-custody solution with open-source code, it does not charge any extra fees - you only pay the network fee. This is different from exchanges, which often add their own fees on top of the Bitcoin network fee.
Depending on whether you want to send BTC or swap BTC to Ethereum, Solana, or BNB (the wallet supports more than 100 blockchains and 10M+ tokens), you can choose the appropriate fee level. The wallet interface offers different options, from low to high. This allows you to either speed up transaction confirmation or save on Bitcoin fees if there is no urgency.
The table below shows the fee priority levels in Gem Wallet.
Fee Priority Levels in Gem Wallet
| Priority | Typical Fee Range | Confirmation Time | Best For |
|---|---|---|---|
| Low (Economy) | 1-5 sat/vB | 30-60 minutes or longer | Non-urgent transfers, savings deposits |
| Normal (Standard) | 10-20 sat/vB | 10-30 minutes (1-3 blocks) | Regular transactions, most use cases |
| High (Fast) | 30-100+ sat/vB | 0-10 minutes (next block) | Urgent payments, time-sensitive transfers |
If you set the Bitcoin transfer fee too low, the transaction may stay pending for a long time - sometimes for days or even weeks. If this happens, feel free to reach out to our support team, and we’ll be happy to help.
